The audit of UC's management shows that the real threat to higher education is inside the house

Rich Pedroncelli / Associated Press

Ready for the hot seat: UC Regents Chair Monica Lozano, left, and UC President Janet Napolitano await their turn to respond to State Auditor Elaine Howle's report on the system administration during a legislative hearing Tuesday.

Ready for the hot seat: UC Regents Chair Monica Lozano, left, and UC President Janet Napolitano await their turn to respond to State Auditor Elaine Howle's report on the system administration during a legislative hearing Tuesday. (Rich Pedroncelli / Associated Press)

What the report and the responses demonstrate is that UC, once the jewel among U.S. public universities, is not in good hands. A thorough housecleaning is in order. That’s not merely because of flaws in the UC administration’s spending and accounting, but because those flaws undermine the administration’s ability to make the case for UC’s mission and protect the system from its enemies.

I've been the auditor for 17 years, and in all that time I've never had a situation like this occur.— State Auditor Elaine Howle on the official interference with her audit of UC President's office

The fight that has erupted between Howle and Napolitano, observes Christopher Newfield, a UC Santa Barbara literature professor and frequent critic of the administration, “marks another setback for public understanding of the deeper issues raised by the report.”

Prominent among them is the role of research in UC’s mission and “the unpleasant truth that scientific research is not a profit center,” Newfield says. “It’s a huge money loser from the private point of view and a huge benefit from the public good point of view.” But that message is obscured because of UCOP’s exposure by Howle as a hive of bad management.

Howle’s core findings certainly are discouraging. Her staff determined that Napolitano’s office, known as UCOP, maintained an undisclosed reserve reaching $175 million in 2015-16 — while seeking larger assessments from the system’s 10 campuses every year since 2011. The campus assessments provide about 90% of UCOP’s budget.

“In effect,” the report states, “the Office of the President received more funds than it needed each year, and it amassed millions of dollars in reserves that it spent with little or no oversight from the regents or the public.” A “significant portion” of the reserves, it adds, “consists of funds the campuses could have retained and spent for other purposes.”

While UCOP drained individual campus coffers and maintained what Howle suggests was a slush fund, the regents — evidently convinced that the system was fiscally on its knees — raised tuition 2.5% in January, the first tuition increase since 2011. Howle’s report intensifies pressure on the regents to roll back the increase, which is expected to bring in $88 million a year.

Howle documented how UCOP is not only overstaffed by comparison to other big public university systems, but overpaid, with salaries and benefits outstripping those of other state employees performing similar work. She found that the office’s financial record-keeping was so sloppy it didn’t even know how much money it had sloshing around. At Tuesday’s hearing, when Napolitano caviled that the UCOP reserve wasn’t $175 million, but $170 million, Howle shot back: “They didn’t know they had $175 million. After my staff did the work, UCOP was able to go back” and figure out its accounts.

More generally, Napolitano contends that the reserve includes $83 million in “restricted” funds that must be spent on specific projects, and $49 million already committed to multiyear high-priority programs. The real reserve is only $38 million, she says, which is “a prudent and reasonable” reserve.

Howle disputed much of that. She said that at least some of the restrictions are self-imposed by UCOP and could be reversed to liberate more money for the campuses. As for the claim that $38 million is a reasonable reserve, Howle replied: Says who?

“We don’t argue that they don’t need a reserve,” she told the legislators; but UCOP seems to have picked the figure out of the air. “They don’t even have a policy on how big the reserve should be.”

Complaints have been rising for years about the bloated ranks and pay of UC administrators, and Howle puts some meat on those bones. Over the six-year period of the audit, UCOP staff expanded by 11% — a bit more than total UC staff, and way more than the 6% increase in academic full-time staff equivalents. Most of the UCOP expansion took place at its Oakland headquarters, rather than at the campuses (where it also stations staff). The UCOP payroll has increased by 36% to $187 million in that time, about three times the pace of inflation.

UCOP is vastly richer in staff per enrollment than Howle’s benchmark systems. There’s one UCOP employee for every 220 students at the 10 campuses; at Cal State University’s chancellor’s office, it’s one administrator for every 906 students at 23 campuses; at the eight-campus University of Texas, one central administrator for every 290 students; and at the eight-campus University of Florida, one for every 5,486 students.

Some CSU officials have duties that are split among more than one UCOP employee. The auditors observed that CSU’s chief financial officer in 2014-15 earned $70,000 less than the chief financial officer at UCOP, but was also responsible for information technology services — a function performed by a separate vice president for IT at UCOP at an additional salary of $345,100.

California State Auditor

UCOP's staff is growing, and compared to other multi-campus systems may already be too big.

UCOP's staff is growing, and compared to other multi-campus systems may already be too big. (California State Auditor)

Napolitano argued that her office’s role is unique among public university systems to the extent it takes responsibilities off its member campus’ hands. That may well be so, but UCOP’s poor recordkeeping gave Howle grounds for skepticism — when she asked UCOP for documentation supporting the claim, it couldn’t dredge up any.

What may be Howle’s most telling finding pertains to how UCOP reacted to its audit. According to Howle, Napolitano’s deputies actively interfered with her staff’s work. For weeks they delayed the production of figures and documents. They maintained that she had no legal authority to ask for some material, until her agency’s lawyers met with UCOP’s lawyers and explained chapter-and-verse exactly how far-reaching Howle’s authority is.

An even bigger shock is Howle’s assertion that UCOP manipulated the results of surveys she had sent to the individual campuses about the utility of UCOP programs and policies, editing or ordering rewrites of campus responses typically to make UCOP look better. According to my colleagues Patrick McGreevy and Teresa Watanabe, after UC San Diego said it was “dissatisfied” with transparency over the campus assessments in its survey response, the final version was changed to “satisfied.” UC Deputy Chief of Staff Bernie Jones, who coordinated this shortstopping maneuver, said campus officials made the change, not him.

Campus officials had been specifically instructed to deal directly with Howle’s office, not to refer the surveys to UCOP. Napolitano’s explanation for the interference was transparently bogus. She said UCOP was concerned that the surveys had been sent to campus officials who weren’t in a position to answer them.

“We wanted to be sure the responses were accurate,” she told the legislative hearing. “It’s clear in retrospect that this could have been handled better … because it has created the wrong impression.”

Howle, however, made crystal clear that UCOP went to extraordinary lengths to stand in her way. “I've been the auditor for 17 years,” she said at the hearing, “and in all that time I've never had a situation like this occur.”

The audit report underscores how badly UC and its administration have lost credibility with the public and the Legislature. The result, Newfield says, is the disdain for centrally funded research manifested in Howle’s report, which identified $88 million in basic science programs in 2015-2016 that might be inadequately defined, justified, or monitored.

There’s a place for UCOP-style coordination, Newfield says: “Campus faculty can be blind to social needs that people at the UCOP level can see better because they look at the state as a whole.” But that point isn’t being made because “the whole discussion is about mismanagement and overspending.”

UCOP hasn’t been handling its core mission well, and handled Howle’s questions worse. The losers will be students, researchers, science and California.

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